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American Superconductor Corporation: A Great Short-Term And Long-Term Opportunity

Elle Investments profile picture
Elle Investments


  • Since more than tripling starting in early 2018, AMSC’s stock has declined about 50%, with no change in the future prospects.
  • REG is looking to disrupt legacy power grid designs and approaches, while SPS is looking to disrupt legacy copper-based mine countermeasure systems aboard Naval vessels.
  • The initial commercial orders for both products in late 2018 that contributed to the stock surge validate the opportunity.
  • The balance sheet is adequate now that the Sinovel settlement payment has been received, putting that chapter of the company’s history behind us.
  • Our best-case scenario PT is $18.49/share, which offers 158% upside.

Investment Thesis Summary

American Superconductor Corporation's (NASDAQ:AMSC) stock more than tripled starting in early 2018, on the expectation (and eventually the respective announcements) of the company's first commercial orders for disruptive new products Resilient Electric Grid ("REG") and Ship Protection Systems ("SPS"). Since climbing above $15.00/share, it has since declined about 50% due to general market fatigue. This is no longer the same company whose Wind segment got crushed by the loss of major customer Sinovel ten years ago. The Grid segment, driven by its two main products targeting the US Navy and electric utilities, is poised for very strong growth. Our best-case scenario PT is $18.49/share, which offers 158% upside. We think AMSC is a Strong Buy.

The (Distant) Story

AMSC: 10-Yr Stock Chart

Source: Seeking Alpha

On November 1, 2010, American Superconductor Corporation closed at just below $370/share and sported a market cap in the billions. Out of the blue, its primary customer, Chinese wind giant Sinovel Wind Group, announced that they would no longer be accepting shipments of wind turbine components from AMSC. Eventually, it came to light that a former AMSC engineer had stolen some intellectual property ("IP") that Sinovel was now using to produce its own components. By the end of 2011, AMSC was trading under $40/share and had become the poster child for American companies complaining of IP theft at the hands of the Chinese. They were even featured on an episode of CBS's 60 Minutes, titled "The Great Brain Robbery," which aired on January 17, 2016.

After years of legal disputes which spanned across America, China, and the EU, AMSC and Sinovel finally settled all of their existing commercial disputes on July 3, 2018, for the sum of $58M - an absolute pittance, considering AMSC's losses had exceeded $500M. At this point, however, the Sinovel chapter of the company's history is fully behind

This article was written by

Elle Investments profile picture
Elle Investments is a small family office. At the single investment level, we look for asymmetric opportunities generally created by a disconnect between value (fundamentals or upside opportunity) and market sentiment. Long-term portfolio risk is managed through a “quantamental approach” that delivers alpha over the long term. You can read a full description of our investing philosophy on our website (http://elle-investments.com). We welcome your feedback.

Analyst’s Disclosure: I am/we are long AMSC. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Disclaimer: The Elle Investments portfolio is managed utilizing a “quantamental” approach where each position, while based on Fundamental Analysis, is sized as part of a larger quantitative portfolio. The commentary presented here is for research purposes only and is not to be taken as investment advice. Readers are expected to perform their own due diligence and/or hire an investment professional prior to entering/exiting positions. Published research ideas are related to the specific market price and publicly available information at the time of research submission/publication. Elle Investments will enter/exit positions without notice.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (5)

Elle Investments profile picture
The stock has entered our PT range and we have begun lightening the position.
MWinMD profile picture
Great overview of the company and its technologies. It's so hard to value this one. It could be a fifty-bagger from here over the next ten years, or it could go BK trying. Best to keep a little of it in the portfolio, and just ride out the catalyst-lull cycles.
I thought this provided a good overview of their technology and put the wind and power segment in the proper perspective (small, with competition). Also briefly spelled out the financial history and prospects/risks for the future.
if the trchnoly Is so good why has someone not taken them over. to the author what are the take over chances and who would the acquirer?
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